Millennium Post

Time for a 1991 redux

The last days of Pranab Mukherjee were not particularly happy at North Block. Mukherjee, UPA’s main trouble shooter and a Congress veteran was too senior a leader and too seasoned a politician to have been accused of bungling with India’s economy, especially when most knew that at least in some cases, Mukherjee could do very little but wait in anticipation for the global economy to rise out of the blues.

India’s nine-year low GDP rate of 6.5 per cent and an almost negligible industrial growth was a real dampener for the incumbent finance minister and it did not help that the rupee slid from bad to worse and inflation showed no sign of decline. In such cases - inflation, the weathering rupee, import subsidies, reforms in retail and aviation etc, many had felt that more could have been done by the former FM. Political and coalition obligations were of course acting as deterrents there but there was a lingering feeling that had the finance portfolio been handled by a bonafide economist, it could have been different. Pranab was deemed a politician par excellence but not the right manager of the nation’s money. And for them, the fact that Prime Minister Manmohan Singh has, on Mukherjee’s leaving office, taken over the finance portfolio, is an expected but nevertheless cheerful development.

There is hence some relief that a finance guy is at the helm and he may take risks to de-stagnate the economy, risks others may have been averse to. But Singh’s job may not be easy at all. Yes, he was the man who took the decisive steps to liberalisation when, in 1991, India had to pledge its gold to avoid defaulting on loan repayments. We have come a long, really long way from then. But now a set of new economic challenges are in front of India. Singh, who has served as RBI governor and finance minister, knows the intricacies of the economy more than anyone else in the Indian political establishment. He has his trusted lieutenant Montek Singh Ahluwalia as Planning Commission chief and may hire Raghuram Rajan, former chief economist at IMF and already an advisor to him, as his Chief Economic Advisor. Can he and his team do what they did in 1991? That’s the question.  

On the first day as the FM, Singh has already spoken about reviving the ‘animal spirit’ in the economy. And we may see some tweaking in interest rates, export and import taxes etc. No one really is expecting big ticket reform at this time but very soon, the industry and the public well expect some hard hitting policy decisions and measures.That is when Singh will be tested. And that is when Singh’s and in extension UPA’s long-tern political relevance will come to be measured.
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